SIXTH EDITION

GLOBAL EDITION

Bruce R. Barringer
Oklahoma State University

R. Duane Ireland
Texas A & M University

Harlow, England • London • New York •

Boston •
San Francisco • Toronto •
Sydney • Dubai •
Singapore •
Hong Kong
Tokyo • Seoul •
Taipei • New Delhi •
Cape Town • Sao Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan
Contents
Preface 13 Economic Impact of Entrepreneurial Firms 50

Entrepreneurial Firms' Impact on Society 51

Entrepreneurial Firms' Impact on Larger Firms 51

PART 1 Decision to Become an
The Entrepreneurial Process 52

Entrepreneur 27 Decision to Become an Entrepreneur (Chapter 1) 52

Developing Successful Business Ideas

CHAPTER 1 Introduction to (Chapters 2-6) 53

Entrepreneurship 29 Moving from an Idea to an Entrepreneurial Firm

Opening Profile—SUPERJAM: The Classic (Chapters 7-10) 54

Entrepreneurial Story 29
Managing and Growing an Entrepreneurial Firm
Introduction to Entrepreneurship 31 (Chapters 11-15) 54

What Is Entrepreneurship and Why Is It Developing Skills for Your Career 54

Important? 32 Chapter Summary 55 | Key Terms 57

Why Do People Become Entrepreneurs? 33 Review Questions 57 \ Application Questions 57

Be Their Own Boss 33 You Be the VC 1.1 59 \ You Be the VC 1.2 59

Pursue Their Own Ideas 34 CASE 1.1 60 | CASE 1.2 63

Pursue Financial Rewards 35 Endnotes 65

Characteristics of Successful Entrepreneurs 35

Passion for the Business 36

Product/Customer Focus 38
PART 2 Developing Successful Business
WHAT WENT WRONG? Prim: How
Ideas 69
a Lack of Passion
and Resolve Can Kill a Business 39

Tenacity Despite Failure 40

CHAPTER 2 Recognizing Opportunities
and Generating Ideas 71
Execution Intelligence 40

Common Opening Profile—WIIW: Solving Foot Pain

Myths About Entrepreneurs 41
and Fatigue via Custom Fitted 3D Printed
SAVVY ENTREPRENEURIAL FIRM: Start-Up
Insoles 71
Incubators and Accelerators: A Smart Way of
The Differences Between Opportunities and
Gaining Access to Mentors, Partners, Investors,
Ideas 72
and Other Critical Start-up Resources 42
Three Ways to Identify Opportunities 74
Myth 1: Entrepreneurs Are Born, Not Made 43

Myth 2: Entrepreneurs Are Gamblers 43 Observing Trends 74

Myth 3: Solving a Problem 80

Entrepreneurs Are Motivated Primarily
by Money 44 SAVVY ENTREPRENEURIAL FIRM: Careem: Mobiliz¬

Myth
ing a Solution to a Problem 82
4: Entrepreneurs Should Be Young
and Energetic 44 Finding Gaps in the Marketplace 83

WHAT WENT WRONG? Why Company That

Myth 5: Entrepreneurs Love the Spotlight 45 a

Solved a Problem with a Great Product Went Out of

Types of Start-Up Firms 45
Business 85
PARTNERING FOR SUCCESS: Partnering with College
Personal Characteristics of the Entrepreneur 86
Students via Campus Ambassador and Campus Rep
Prior Industry Experience 86
Programs 46

Changing Demographics of Entrepreneurs 47 Cognitive Factors 87

Women Social Networks 87

Entrepreneurs 47

Minority Entrepreneurs 48 Creativity 88

Senior Entrepreneurs 48 Techniques for Generating Ideas 89

Millennial Entrepreneurs 49 Brainstorming 89

The Positive Effects of Focus Groups 91

Entrepreneurship
and Entrepreneurial Firms 49 Library and Internet Research 92
7
8 CONTENTS

PARTNERING FOR SUCCESS: Want Help Converting General Categories of Business Models 151

a Business Idea into a Profitable Company? Find a Standard Business Models 151

Mentor 93 Business Models 153

Disruptive
Other Techniques 94
WHAT WENT WRONG? Peer-to-Peer Business
Chapter Summary 94 | Key Terms 95 Models: Good for Some, Not So Good for
Review Questions 95 \ Application Questions 96 Others 154

You Be the VC 2.1 97 | You Be the VC 2.2 97 Model

The Barringer/Ireland Business
CASE 2.1 98 | CASE 2.2 101
Template 156
Endnotes 103 Core Strategy 156

Resources 160
CHAPTER 3 Feasibility Analysis 107
Financials 162

Opening Profile-OWLET BABY CARE: The Value of Operations 165

Validating a Business Idea 107
PARTNERING FOR SUCCESS: Upwork and Guru:
Feasibility Analysis 109
Platforms That Facilitate the Forming of Partnerships
Product/Service Feasibility Analysis 110 with Freelancers 168

Product/Service Desirability 111 Chapter Summary 169 | Key Terms 170

Product/Service Demand 115 Review Questions 170 | Application Questions 171

Industry/Target Market Feasibility Analysis 118 You Be the VC 4.1 172 | You Be the VC 4.2 172

SAWY ENTREPRENEURIAL FIRM: Prototyping: How CASE 4.1 173 | CASE 4.2 177

to Build What the Customer Wants 119 Appendix 1 182

120 Endnotes 183

Industry Attractiveness
Target Market Attractiveness 121

122
CHAPTER 5 Industry and Competitor
Organizational Feasibility Analysis
Analysis 187
Management Prowess 122
Opening Profile—WRITELAB: Occupying a Unique
Resource Sufficiency 122
Position in a Challenging Industry—and Thriving 187
PARTNERING FOR SUCCESS: Finding the Right
Industry Analysis 189
Business Partner 123
Studying Industry Trends 190
Financial Feasibility Analysis 124
PARTNERING FOR SUCCESS: Three Ts That Are
Total Start-Up Cash Needed 124
Important for Becoming Active in an Industry: Trade
Financial Performance of Similar Businesses 125
Associations, Trade Shows, and Trade Journals 191
Overall Financial Attractiveness of the Proposed The Five Forces Model 192
Venture 126
Threat of Substitutes 193
A Feasibility Analysis Template 127
Threat of New Entrants 194
WHAT WENT WRONG? How Feasible Was the
Soda Machine to With? 128
Rivalry among Existing Firms 195
Keurig At-Home Begin
Bargaining Power of Suppliers 196
Chapter Summary 129 | Key Terms 130
Bargaining Power of Buyers 197
Review Questions 130 | Application Questions 131

You Be the VC 3.1 132 | You Be the VC 3.2 132 The Value of the Five Forces Model 198

CASE 3.1 133 | CASE 3.2 136 WHAT WENT WRONG? SharpScholar: Lessons
139 Learned from a Failed EdTech Start-up 199
Appendix 3.1

140 Industry Types and the Opportunities They

Appendix 3.2
Offer 201
Appendix 3.3 142

Endnotes 144 Emerging Industries 201

Fragmented Industries 202

CHAPTER 4 Developing an Effective Mature Industries 203

Business Model 147 Declining Industries 203

Opening Profile—INDIEU: Executing on an Established Global Industries 204

Business Model and Preparing for the Future 147 Competitor Analysis 204
Business Models and Their Importance 149 Identifying Competitors 204

SAVVY ENTREPRENEURIAL FIRM: CoachUp: How SAWY ENTREPRENEURIAL FIRM: Thriving in a

One Company Creates, Delivers, and Captures Value Crowded Industry by Creating Meaningful Value and
for Its Stakeholders 150 Differentiation from Competitors 206
 CONTENTS 9

Sources of Competitive Intelligence 207 Implement an Ethics Training Program 265

Completing a Competitive Analysis Grid 207 Dealing Effectively with Legal Issues 266

Chapter Summary 209 | Key Terms 210 Choosing an Attorney for a Firm 266

Review Questions 210 | Application Questions 211 SAVVY ENTREPRENEURIAL FIRM: Don't Hesitate to
You Be the VC 5.1 212 | You Be the VC 5.2 212 Say "We're Sorry" 267

CASE 5.1 213 | CASE 5.2 215

Drafting a Founders' Agreement 269

Endnotes 219 Avoiding Legal Disputes 269

PARTNERING FOR SUCCESS: Vesting Owner¬

CHAPTER 6 Writing a Business ship in Company Stock: A Sound Strategy for

Plan 221 Start-Ups 270

Obtaining Business Licenses and Permits 273

Opening Profile-ATHLETIC PROPULSION LABS:
How Athletic Propulsion Labs Benefited from Writing a Federal Licenses and Permits 273

Business Plan 221 State Licenses and Permits 273

The Business Plan 223 Local Licenses and Permits 275

Reasons for Writing a Business Plan 224 WHAT WENT WRONG? How Flytenow Got Grounded
Who Reads the Business Plan—and What Are They by Government Regulations 276

Looking For? 225 Choosing a Form of Business Organization 276

A Firm's Employees 225 Sole Proprietorship 277

Investors and Other External Stakeholders 226 Partnerships 279

Guidelines for Writing a Business Plan 226 Corporations 280

Structure of the Business Plan 227 Limited Liability Company 283

Content of the Business Plan 228 Chapter Summary 284 | Key Terms 285

Outline of the Business Plan 230 Review Questions 286 | Application Questions 286

Exploring Each Section of the Plan 230 You Be the VC 7.1 288 \ You Be the VC 7.2 288

SAVVY ENTREPRENEURIAL FIRM: Know When to

CASE 7.1 289 \ CASE 7.2 292

Hold Them, Know When to Fold Them 231 Appendix 7.1 296

WHAT WENT WRONG? What Move Loot Learned the Endnotes 298

Hard Way about the Economics of a Business 237

Presenting the Business Plan to Investors 242

CHAPTER 8 Assessing a New Venture's
PARTNERING FOR SUCCESS: Establishing
Financial Strength and Viability 301
a Community of True Believers and Early
Opening Profile—ESSENTIUM MATERIALS: Managing
Evangelists 243
Finances Prudently 301
The Oral Presentation of a Business Plan 244
Introduction to Financial Management 303
Questions and Feedback to Expect from Investors 246
Financial Objectives of a Firm 303
Chapter Summary 246 \ Key Terms 247
The Process of Financial Management 304
Review Questions 247 | Application Questions 248
PARTNERING FOR SUCCESS: Organizing Buy¬
You Be the VC 6.1 250 | You Be the VC 6.2 250
ing Groups to Cuts Costs and Maintain
CASE 6.1 251 | CASE 6.2 254
Competitiveness 305
Endnotes 257
Financial Statements 306

Historical Financial Statements 308

PART 3 Moving from an Idea to an SAVVY ENTREPRENEURIAL FIRM: Know the Facts

Entrepreneurial Firm 259 Behind the Numbers 310

Forecasts 315

CHAPTER 7 Preparing the Proper Sales Forecast 316

Ethical and Legal Foundation 261 Forecast of Costs of Sales and Other Items 317

Opening Profile—BILLY GOAT ICE CREAM: Proceeding Pro Forma Financial Statements 319

on a Firm Legal Foundation 261 Pro Forma Income Statement 320

Establishing a Strong Ethical Culture for a WHAT WENT WRONG? Be Careful what You Wish
Firm 263 for: How Growing too Quickly Overwhelmed One
Lead by Example 264 Company's Cash Flow 321

Establish a Code of Conduct 265 Pro Forma Balance Sheet 321

10 CONTENTS

Pro Forma Statement of Cash Flows 323 Personal Funds 376

324 Friends and Family 376

Ratio Analysis
Chapter Summary 325 | Key Terms 326 Bootstrapping 377

Review Questions 326 | Application Questions 327 Preparing to Raise Debt or Equity Financing 378

You Be the VC 8.1 328 | You Be the VC 8.2 328 381

Sources of Equity Funding
CASE 8.1 329 | CASE 8.2 332 381
Business Angels
Endnotes 334 383
Venture Capital
Initial Public Offering 384
CHAPTER 9 Building a New-Venture
WHAT WENT WRONG? How One Start-Up Caught
Team 337 the Attention of VCs, Gained 25,000 Daily Users, and
Opening Profile-WILD FRIENDS FOODS: Hitting the Still Failed 385
Ground Running 337
Sources of Debt Financing 387
Liability of Newness as a Challenge 339
Commercial Banks 387

Creating a New-Venture Team 339

SBA Guaranteed Loans 388
The Founder or Founders of a Venture 340
Other Sources of Debt Financing 389
WHAT WENT WRONG? Devver: How Miscues in 390
Creative Sources of Financing and Funding
Regard to the Composition and Management of a
Crowdfunding 390
New-Venture Team Can Kill a Start-Up 342
Leasing 391
The Management Team and Key Employees 344
SBIR and STTR Grant Programs 391
SAWY ENTREPRENEURIAL FIRM: Overcoming
Other Grant Programs 393
a Lack of Business Experience in
345 Strategic Partners 393
Malaysia
PARTNERING FOR SUCCESS: Collaborative Soft¬ SAWY ENTREPRENEURIAL FIRM: Working Together:
ware: Helping New Venture Team Members Achieve How Biotech Firms and Large Drug Companies
Their Goals 349 Bring Pharmaceutical Products to Market 394

The Roles of the Board of Directors 350 Chapter Summary 394 | Key Terms 396

Out the Team: The Role of Professional

Review Questions 396 | Application Questions 397
Rounding
Advisers 352 You Be the VC 10.1 398 \ You Be the VC 10.2 398

Board of Advisors 352

CASE 10.1 399 | CASE 10.2 402

Endnotes 406
Lenders and Investors 354

Other Professionals 355

Consultants 355 PART 4 Managing and Growing an

Chapter Summary 356 | Key Terms 357

Entrepreneurial Firm 409
Review Questions 358 | Application Questions 358

You Be the VC 9.1 360 | You Be the VC 9.2 360 CHAPTER 11 Unique Marketing
CASE 9.1 361 | CASE 9.2 364
Issues 411
Endnotes 367
Opening Profile—REAL TIME CASES: Creating a

New Brand in Business Cases via Guerilla Marketing

CHAPTER 10 Getting Financing or Techniques 411

Funding 371 Selecting a Market and Establishing a

Opening Profile—KINVOLVED: Raising Money Carefully Position 413

and Deliberately 371

Segmenting the Market 413

The Importance of Getting Financing or

Selecting a Target Market 414
Funding 373 Crafting a Unique Market Position 415
Why Most New Ventures Need Funding 373
Branding 416
Cash Flow Challenges 373
SAVVY ENTREPRENEURIAL FIRM: How Retail
Capital Investments 374
Start-ups Compete Against Walmart and Other Big
Lengthy Product Development Cycles 374 Box Retailers 417

PARTNERING FOR SUCCESS: Startup Weekend: A PARTNERING FOR SUCCESS: Two Examples of
Fertile Place to Meet Business Cofounders 375 Successful Co-Branding Partnerships 421

Sources of Personal Financing 376 The 4Ps of Marketing for New Ventures 421
 CONTENTS 11

Product 422 Trade Secret Protection Methods 477

Price 423 Conducting an Intellectual Property Audit 478

WHAT WENT WRONG? What Start-Ups Can Learn Why Conduct an Intellectual Property Audit? 478

about Marketing from Missteps at JCPenney 425 The Process of Conducting an Intellectual Property
Promotion 426 Audit 478

Chapter Summary 479 | Key Terms 480

Place (or Distribution) 433
Review Questions 481 | Application Questions 481
Sales Process and Related Issues 434
You Be the VC 12.1 483 | You Be the VC 12.2 483
Chapter Summary 437 | Key Terms 438
CASE 12.1 484 | CASE 12.2 485
Review Questions 438 | Application Questions 439
Endnotes 487
You Be the VC 11.1 440 | You Be the VC 11.2 440

CASE 11.1 441 | CASE 11.2 445

Endnotes 448
CHAPTER 13 Preparing for and
Evaluating Challenges of
the

CHAPTER 12 The Importance of Growth 489

Opening Profile—MATI ENERGY: Growing in Fast-

Intellectual Property 451 a

Paced, Yet Conscientious Manner 489

Opening Profile—3DERM SYSTEMS: The Key Role

Firm's Life and Its Preparing for Growth 491

of Intellectual Property Early in a

Ongoing Success 451 Appreciating the Nature of Business Growth 491

of Intellectual 453 Staying Committed Core Strategy 493

The Importance Property to a

Determining What Intellectual Property to Legally Planning for Growth 494

Protect 455 Reasons for Growth 495

The Four Key Forms of Intellectual Property 455 of Scale 495

Capturing Economies
Patents 456 WHAT WENT WRONG? Dishero: How Mediocre

457 Success Lead to Difficult Decisions 496

Types of Patents can

Who Can Apply for a Patent? 459 Capturing Economies of Scope 497

The Process of Obtaining a Patent 459 Market Leadership 497

SAVVY ENTREPRENEURIAL FIRM: Knowing Influence, Power, and Survivability 497

the Ins and Outs of Filing a Provisional Patent Need to Accommodate the Growth of Key
Application 462 Customers 498

Patent Infringement 463 Ability to Attract and Retain Talented Employees 498

Trademarks 463 Managing Growth 498

PARTNERING FOR SUCCESS: How the Maker Knowing and Managing the Stages of Growth 498

Movement is Bringing Individual Inventors and Large SAVVY ENTREPRENEURIAL FIRM: Salesforce.com
Firms Together 464 502
Crosses the Chasm
The Four Types of Trademarks 465
Challenges of Growth 503
What Is Protected Under Trademark Law? 466
Managerial Capacity 503

Exclusions from Trademark Protection 467

Firm 504
Day-to-Day Challenges of Growing a

The Process of Obtaining a Trademark 467

PARTNERING FOR SUCCESS: Three Choices for
Trademark Infringement 469 Fulfilling Orders for an Online Company 505

WHAT WENT WRONG? David Conquers Goliath in Chapter Summary 507 | Key Terms 508

Three Trademark Disputes 470 Review Questions 508 | Application Questions 508

Copyrights 471 You Be the VC 13.1 510 | You Be the VC 13.2 510

What Is Protected by a Copyright? 471 CASE 13.1 511 | CASE 13.2 514

Exclusions from Copyright Protection 472 Endnotes 518

How to Obtain a Copyright 472

Copyright Infringement 473 CHAPTER 14 Strategies for Firm

Copyright and the Internet 474 Growth 521

Trade Secrets 475 Opening Profile—FILTEREASY: Employing Both Internal

476 and Extrenal Strategies for Growth 521

What Qualifies for Trade Secret Protection?
Internal Growth Strategies 522
Trade Secret Disputes 476
12 CONTENTS

New Product Development 523 Steps to Franchising a Business 564

Additional Internal Product-Growth SAVVY ENTREPRENEURIAL FIRM: Wahoo's Fish

Strategies 526 Taco: A Moderate-Growth Yet Highly Successful

Improving an Existing Product or Service 526 Franchise Organization 565

Increasing the Market Penetration of an Existing Product Selecting and Developing Effective Franchisees 567

Service 526 Advantages

or
Disadvantages
and of Establishing a

Extending Product Lines 527 Franchise System 568

Geographic Expansion 527 Buying a Franchise 570

International Expansion 528 Is Franchising Right for You? 570

WHAT WENT WRONG? Lessons for Growth-Minded WHAT WENT WRONG? Slowing Down Growth:

Start-Ups from Crumbs Bake Shop's Failure 529 Why Did Just Falafel Become JF Street
Food? 571
Assessing a Firm's Suitability for Growth through
International Markets 530 The Cost of a Franchise 572

Foreign Market Entry Strategies 531 Finding a Franchise 574

Selling Overseas 531 Advantages and Disadvantages of Buying a

External Growth Franchise 575

Strategies 532

Mergers and Acquisitions 532 Steps in Purchasing a Franchise 577

Watch Out! Common Misconceptions about

Licensing 536
Franchising 578
Strategic Alliances and Joint Ventures 537

SAVVY ENTREPRENEURIAL FIRM: Fetchr: Legal Aspects of the Franchise Relationship 579
Growing
Federal Rules and Regulations 579
through Acquisitions and Alliances 538

PARTNERING FOR SUCCESS: Three State Rules and Regulations 580

Steps to Alliance
Success 540 More about Franchising 582

Chapter Summary 542 | Key Terms 543 Franchise Ethics 582

Review Questions 543 | Application Questions 544 International Franchising 583

You Be the VC 14.1 545 \ You Be the VC 14.2 546 The Future of Franchising 584
CASE 14.1 546 \ CASE 14.2 550
PARTNERING FOR SUCCESS: Franchises Partner
Endnotes 554 with Nonprofits to Give Back 585

Chapter Summary 586 | Key Terms 587

CHAPTER 15 Franchising 557 Review Questions 587 \ Application Questions 588
Opening Profile-UPTOWN CHEAPSKATE: You Be the VC 15.1 589 \ You Be the VC 15.2 589
Franchising as a Form of Business Ownership CASE 15.1 590 | CASE 15.2 593
and Growth 557
Endnotes 595
What Is Franchising and How Does It Work? 560
What Is Franchising? 560 Glossary 597

How Does Franchising Work? 560 Name Index 607

Establishing a Franchise System 563 Company Index 610

When to Franchise 564 Subject Index 613